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Wages, Pensions, and Public-Private Sector Compensation Differentials

Author

Listed:
  • Philipp Bewerunge

    (Neuss Associates)

  • Harvey S. Rosen

    (Princeton University)

Abstract

We use a sample of full-time workers mostly over 50 years of age from the 2004 and 2006 waves of the Health and Retirement Study to investigate whether workers in federal, state, and local government receive more generous wage and pension compensation than private sector workers, ceteris paribus. With respect to hourly remuneration (wages plus employer contributions to defined contribution plans), federal workers earn a premium of about 39 percent, taking differences in employee characteristics into account. The differential varies by gender and race. However, there are no statistically discernible differences between state and local workers and their private sector counterparts, ceteris paribus. On the other hand, pension wealth accumulation is greater for employees in all three government sectors than for private sector workers, even after taking worker characteristics into account. As a proportion of the hourly private-sector wage, the hourly equivalent public-private differentials are 14.3 percent for federal workers, 8.3 percent for state workers, and 8.6 percent for local workers, ceteris paribus. Again, there are differences by gender and race. We find no evidence that highly-educated individuals are penalized by taking jobs in the public sector, either with respect to wages or pension wealth.

Suggested Citation

  • Philipp Bewerunge & Harvey S. Rosen, 2012. "Wages, Pensions, and Public-Private Sector Compensation Differentials," Working Papers 1388, Princeton University, Department of Economics, Center for Economic Policy Studies..
    • Handle: RePEc:pri:cepsud:227
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    File URL: https://gceps.princeton.edu/wp-content/uploads/2017/01/227rosen.pdf
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    References listed on IDEAS

    as
    1. Congressional Budget Office, 2012. "Comparing the Compensation of Federal and Private-Sector Employees," Reports 42921, Congressional Budget Office.
    2. Alan L. Gustman & Olivia S. Mitchell & Thomas L. Steinmeier, 1995. "Retirement Measures in the Health and Retirement Study," Journal of Human Resources, University of Wisconsin Press, vol. 30, pages 57-83.
    3. Joseph F. Quinn, 1979. "Wage Differentials among Older Workers in the Public and Private Sectors," Journal of Human Resources, University of Wisconsin Press, vol. 14(1), pages 41-62.
    4. Gustman, Alan L. & Steinmeier, Thomas L. & Tabatabai, Nahid, 2010. "Pensions in the Health and Retirement Study," Economics Books, Harvard University Press, number 9780674048669, Spring.
    5. Joshua D. Angrist & Jörn-Steffen Pischke, 2009. "Mostly Harmless Econometrics: An Empiricist's Companion," Economics Books, Princeton University Press, edition 1, number 8769.
    6. Alan S. Blinder, 1973. "Wage Discrimination: Reduced Form and Structural Estimates," Journal of Human Resources, University of Wisconsin Press, vol. 8(4), pages 436-455.
    7. Richard B. Freeman & Casey Ichniowski, 1988. "When Public Sector Workers Unionize," NBER Books, National Bureau of Economic Research, Inc, number free88-1, March.
    8. Congressional Budget Office, 2012. "Comparing the Compensation of Federal and Private-Sector Employees," Reports 42921, Congressional Budget Office.
    9. Alan B. Krueger, 1988. "Are Public Sector Workers Paid More Than Their Alternative Wage? Evidence from Longitudinal Data and Job Queues," NBER Chapters, in: When Public Sector Workers Unionize, pages 217-242, National Bureau of Economic Research, Inc.
    10. Gyourko, Joseph & Tracy, Joseph, 1988. "An Analysis of Public- and Private-Sector Wages Allowing for Endogenous Choices of Both Government and Union Status," Journal of Labor Economics, University of Chicago Press, vol. 6(2), pages 229-253, April.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Jason L. Kopelman & Harvey S. Rosen, 2014. "Are Public Sector Jobs Recession-Proof? Were They Ever?," NBER Working Papers 20692, National Bureau of Economic Research, Inc.
    2. Jason L. Kopelman & Harvey S. Rosen, 2014. "Are Public Sector Jobs Recession-Proof? Were They Ever?," Working Papers 240, Princeton University, Department of Economics, Center for Economic Policy Studies..

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    More about this item

    Keywords

    benefits; public employees; retirement; pensions; wages; private sector; HRS; Health Retirement Study; United States;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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